2 THE UK MARKET FOR CONCRETE FRAMES IN CONSTRUCTION
2.3 THE PROCUREMENT PROCESS – AN OVERVIEW
The procurement process plays a significant role in project success and determines the responsibilities of project team members (Rowlinson and McDermott, 1999), so there is good reason to examine its possible influence on choices made in relation to structural frames. In this section the way in which the procurement process is understood in the UK construction industry is investigated. In addition, the importance of fulfilling the clients‘ requirements is described and discussed as clients can play a significant part in the successful outcome of a building project (RIBA, 1993).
2.3.1 Procurement Systems
Procurement was defined by CIB W92 at its meeting in 1991 as the framework within which construction is brought about, acquired or obtained (Rowlinson and McDermott, 1999). Procurement is a process and observable phenomenon entwined
both culturally, politically and practically into the fabric and history of the construction industry (Goodier et al., 2006). Hibberd (1991) has argued that no standard definitions and classification of procurement approaches have become generally acceptable, quite simply because there are no formal structures or agreement on the terms. Furthermore, he highlights that either the term ‗procurement path‘ or
‗procurement approach‘ would be preferable, as the term ‗procurement system‘
implies a degree of scientific rigour which does not exist. Figure 2.1 indicates the elements such as a contract strategy and the client that are functional parts of the procurement system.
Figure 2.1 A systems view of procurement (Rowlinson and McDermott, 1999)
The presumption is that choice of an appropriate procurement system will lead to a successful project outcome; this makes an implicit assumption that the objective of a procurement system is to provide a successful project (Rowlinson and McDermott, 1999). Procurement decisions about construction projects should always be on the basis of value for money over the life of the facility and not on the initial capital cost alone (OGC-06, 2003) hence, procurement decisions have a profound effect on the balance of risk and reward on projects, and the roles of each party in that project.
Furthermore, the procurement route delivers the procurement strategy. It includes the contract strategy that will best meet the client‘s needs. An integrated procurement route should be adopted to deliver the project, where all of these aspects namely;
design; construction, operation and maintenance have been considered together (OGC-06, 2003). There are several established procurement routes that construction industry offers and a number of procurement options available, with several variations to each route, and recognized and well-tried forms of contract exist for the each option available. Each route is suited to a particular set of priorities. Therefore, the most appropriate procurement route is determined by the procurement strategy, including the contract strategy, to fit the project objectives and current circumstances.
Procurement systems can be broadly categorized as follows (Peace and Bennett, 2005;
Masterman, 2006):
Traditional procurement systems: The traditional approach is the most well established procurement route and commonly used; design by consultant is completed before contractors tender for, then carry out, construction (Broome, 2002; Peace and Bennett, 2005). This conventional procurement system has been used by the majority of clients in the industry for at least the past 150 years (Masterman, 2006). Therefore, its greatest strength is that it is widely used and so most building consultants and contractors understand it and are experienced in using it. However, the traditional approach can be slow, expensive, provides unreliable quality, and gives rise to claims against the client to provide extra time and money (Peace and Bennett, 2005).
Integrated procurement systems (Design-Build): This category of procurement systems incorporates all of those methods of managing the design and
construction of a project where these two basic elements are integrated and become the responsibility of one organisation, usually a contractor (Masterman, 2006). The use of Design-Build and its variations have expanded significantly over the last decade (Ernzen and Schexnayder, 2000). Design-Build is explained in more detail in section 2.3.2.
Management-oriented procurement systems: The management approach requires the client to be closely involved in the work of a project team comprising design consultants, construction management consultants and specialist contractors (Masterman, 2006). Although, design and manage is included in management-oriented systems, there are two main forms:
Management Contracting and Construction Management. Management Contracting and Construction Management are slightly different. The main difference is that in Management Contracting the specialist contractors are subcontractors to the Management Contractor, and in Construction Management they have separate contracts with the client (Peace and Bennett, 2005). The management approach is best for clients who want their representative to work closely with creative design consultants to produce an original design within the constraints of time and cost management. The management approach is unnecessarily complex for clients who want straightforward buildings using well established designs and standard components.
Partnering: The UK construction industry has recently witnessed a move to innovative working practices that involve greater collaboration and partnership than has been the case in the past (Hughes et al., 2006). The idea for partnering grew out of the reforms by Sir Michael Latham (1994) and Sir John
Egan (1998). Strategic alliances or partnering arrangements reduce or remove the competitive tendering aspect of building procurement, thereby facilitating early involvement of specialist concrete contractors. Bennett and Jayes (1998) research on 200 case studies of partnering in the UK construction industry shows that partnering can be applied and is significantly more efficient than traditional competitive methods. Moreover, a BRE Report (2005) indicated that contractual arrangements which promote real project partnering and align the motivations of all contractors to those of the client should be pursued strongly by industry and government.
2.3.2 The Design-Build Approach
The last few years have seen a substantial increased market share in the use of Design-Build (Arditi and Lee, 2003; Gidado and Arshi, 2004) mainly as a result of clients becoming disappointed with the drawbacks brought about by the traditional procurement system (Deakin, 1999). Design-Build (D&B) is a form of procurement systems in which the main contractor is responsible for both design and construction to deliver a building to the satisfaction of the client (Akintoye and Fitzgerald, 1995;
Lam et al., 2008). Although some confusion exists amongst inexperienced clients, the term Design-Build has almost been unanimously interpreted and defined as (Masterman, 2006, p.67):
“An arrangement where one contracting organisation takes sole responsibility, normally on a lump sum fixed price basis, for the bespoke design and construction of a client‟s project.”
Design-Build arguably places more responsibility and liability on to the contractor than any other form of procurement (Akintoye, 1994; Peace and Bennett, 2005). Paper
5 (Appendix E) provides a clear understanding of the role which contractors currently play within the decision making process of Design-Build building projects in the UK.
The key benefits of Design-Build include single point responsibility, availability of the contractor‘s knowledge of ‗buildability‘ and the standardisation of the construction process (Franks, 1990; Janssens, 1991; Akintoye, 1994; Turner, 1995).
Furthermore, according to Peace and Bennett (2005), when compared to a traditional approach, Design-Build projects based on a minimal statement (i.e. list of the activities to be accommodated and the functions to be performed by the building with little or no design or specification information on the actual building) are completed 40% faster, while those based on an outline design are completed 25% faster. Also, Design-Build projects are much more likely to be completed on time and are reportedly 15% cheaper than equivalent traditional projects (Peace and Bennett, 2005). However, the Design-Build method also has a number of disadvantages, one of which is the poor quality of design (Franks, 1990; NJCC, 1995). The main reason for this may be that architects have less control over the design process than they would in a traditional approach, as they often become novated to the contractor in the latter (production design) stages. Finally, the advantages of competition (i.e. competitive tendering) may not be passed onto the client when using Design-Build (Rowlinson and McDermott, 1999; Peace and Bennett, 2005).
The principal variants of Design-Build (integrated) procurement systems are described according to Masterman (2006) as follows;
Novated Design-Build;
Package deals;
Develop and construct; and, Turnkey.
In addition, a variety of tender and contractor arrangements can be adopted including Single-Stage (Competitive) and Negotiated Tendering, along with the more innovative Stage Tendering and Partnering arrangements. Single-stage and Two-stage tendering arrangements are the most typical forms adopted on Design-Build projects in the UK construction industry (Drew and Skitmore, 1993). The adoption of two-stage tendering on Design-Build projects is beneficial in terms of the balance between client control over design development and the eventual transfer of design responsibility to the contractor. However, one key drawback is that the preferred contractors‘ role in design development will strengthen its negotiating position, enabling it to drive a particularly hard bargain in the closing stages of the second-stage tender (Rawlinson, 2006b). Single-second-stage competitive tendering provides the client with an early contractual commitment on price and the contractor is not given an opportunity to revisit this. However, second-stage tendering helps the contractor to understand the design. In adopting the single-stage route, the client sacrifices some opportunity to interface with the contractor‘s supply chain and is heavily reliant on the quality of their initial statement of design intent and specification to achieve expected quality standards on site (Rawlinson, 2008). Hence contractors would appear to be highly influential in the decision making process when using two-stage tendering in a Design-Build project. Paper 4 (Appendix D) in particular examines the influence that contractors have on the selection, design or production of the structural frame in a Design-Build project in terms of tendering arrangements, size of the contractor, etc.
In conclusion, Design-Build offers a variety of advantages to improve the implementation of projects (Rowlinson, 1997; Leung, 1999). Adams (1999) showed that majority of clients regard Design-Build as the optimal route to obtain value for money. However, the success of any construction project is attributed to a great many factors and project team members can only focus on the most important ones (Lam et al., 2008). Chan (2000) stated that the performance of an enhanced Design-Build project is based on the criteria of time, cost, quality, functionality and safety requirements, whilst Ndekugri and Turner (1994) suggested that the success of the Design-Build project depends heavily on meeting the client‘s criteria.
2.3.3 The need for a focus on clients’ needs
Generally, a construction project is initiated by the needs of the client (Lam et al., 2008). The future direction of research and development in the concrete frame sector must take cognisance of the importance of understanding the clients‘ requirements (Nolan, 2005). According to Masterman (2006), the client is the organization, or individual, who commissions the activities necessary to implement and complete a project in order to satisfy its/his needs and then enters into a contract with the commissioned parties. The client is the sponsor of the construction process and provides the most important perspective on how the construction industry performs as far as procurement systems are concerned (Rowlinson and McDermott, 1999).
As clients have become more aware and demanding of the construction industry, they are also becoming less tolerant of the problems and the risks involved in the delivery of major projects (Smith et al., 2004). While the focus of Sir Michael Latham‘s report (1994) was the client and clients‘ expectations of the construction industry, it should also be noted that a focus on the customer in the construction industry was one of the
key drivers for change in the Construction Task Force Report (Egan, 1998). Different organisations understand the needs of their clients, but it is debatable whether there is an accurate overall market view. If this view exists, then it is not widely known and needs dissemination (BRE, 2005). In addition, client requirements are changing constantly, but they are not communicated to the whole project team resulting in non-conformities and costly changes at the construction phases (Kagioglou et al., 1998). It has been in the area of strategy that the construction industry has been particularly weak in the past and this has led to the development of alternative procurement systems and the encroachment of other professions into the construction industry (Rowlinson and McDermott, 1999). The UK construction industry has never had the best reputation for meeting its clients‘ expectations (NEDO, 1974; NEDO, 1983;
RIBA, 1993). Evidence of this poor performance is shown in a report from the National Audit Office (2005), which concludes that failure to fully implement best practice procurement and project management in central and local government currently costs £2.6bn a year in terms of avoidable capital and operating costs (Rawlinson, 2006b).